Whilst the previous section looked at the national trends in consumer expenditure over the last ten years, this section will concentrate on the issues of business survival and employment within
0
the retail sector and more specifically the grocery market. Initially, Table 5.2 shows the total number of births (a business that was not present in the previous two years) and deaths (a business that was no longer present in the active file) in GB between 2004 and 2010. The data are taken from the new Business Demography series produced by the ONS which is discussed in more detail in Chapter 4. The data in Table 5.2 suggest that, between 2004 and 2008, the number of business births remained relatively flat. Arguably there has been some decline;
however the rate of births remained above the rate of deaths which indicates an element of growth within the economy. Alternatively, the number of deaths declined between 2004 and 2008, suggesting the number of business surviving past their first year was also on the increase.
Moving into 2008, the data shows a somewhat different picture. The harsh economic climate caused by the recession clearly had an impact on the survival of businesses, as for the first time the death rate overtook the birth rate in 2009. The death rate increased again in 2010 whilst the birth rate stabilised after falling in 2009.
Table 5.2. Business births and deaths between 2004 and 2010 in GB
Births Deaths
Active Count Rate (%) Count Rate (%)
2004 2,106,730 274,350 13.0 239,705 11.4
2005 2,129,255 269,220 12.6 224,580 10.5
2006 2,151,845 249,950 11.6 203,350 9.5
2007 2,222,555 274,770 12.4 219,840 9.9
2008 2,265,740 261,790 11.6 218,380 9.6
2009 2,282,200 232,085 10.2 271,770 11.9
2010 2,241,375 230,555 10.3 292,005 13.0
Source: ONS (2012f)
Figure 5.4 details business death rates between 2008 and 2010 by the 2007 SIC broad groupings. Again, more details are given on the 2007 SIC in Chapter 4. Unfortunately, it was not possible to produce consistent data before 2008 due to the nature of the changes made to the 2003 SIC in 2007. Nevertheless, with the economic downturn not starting until 2008, the data at least allow for exploration of the last three years. Figure 5.4 shows that death rates differ substantially across the different sectors and thus from the national average. Those with particularly high rates in 2010 include ‘business administration & support services’ (22.6 per cent), ‘accommodation and food services’ (15.7 per cent) and ‘construction’ (13.84). The high rates associated with the ‘business administration and support services’ sector is likely due to the large closures of quasi-autonomous non-governmental organisations (quangos), a move by the Coalition Government to improve accountability and cut costs in 2010 (see Chapter 2).
Furthermore, considering the documented impact of the sub-prime mortgage crash on the housing market, one would have also expected the number of ‘construction’ business closures to be high as well. The above average death rate for ‘accommodation and food services’ is also
consistent with the comments made in Section 5.2 that consumers cut back on eating out in restaurants in 2009 and 2010. Interestingly, a number of sectors actually recorded a decrease in the percentage of deaths between 2008 and 2010. For example, between 2009 and 2010, the death rate in the ‘retail’ sector declined. This would imply that after struggling initially during 2008 due to low consumer confidence, the retail sector began to recover. In addition, the
‘health’ and ‘information and communication’ sectors, after an initial increase in death rates, recorded a reduced rate in 2010. Remarkably, the ‘health’ sector reduced its birth rate to levels seen back in 2008.
Figure 5.4. Business death rates by 2007 SIC broad classification from 2008 to 2010 in GB Source: ONS (2012f)
So, to explore the impact of the recession on the retail industry in more detail, Figure 5.5 displays a breakdown of the 2007 SIC ‘retail’ group. The graph highlights the percentage change in births and deaths between 2008 and 2010. The average values for GB and ‘retail’ as a whole have also been included to provide benchmarks. First of all, when compared to the national economic trend for births and deaths, the retail sector shows a smaller increase in deaths and an increase between 2008 and 2010 in the number of births. This is encouraging as it demonstrates the retail sector overall has not suffered as much as some commentators initially predicted (Retail Technology Review, 2009a; Rueben, 2009; Hardie, 2009). In the context of the grocery market, ‘retail sale of food, beverages and tobacco in specialised stores’ represents the sale of groceries by independent retailers and ‘retail sale in non-specialised stores’ covers retailing in supermarkets. Looking specifically at ‘retail sale in non-specialised stores’, there has actually been a reduction in the number of deaths (-10.34 per cent) and an increase in the number of births (+8.92 per cent) between 2008 and 2010. In comparison, the smaller
0 5 10 15 20 25
(%)
2008 2009 2010
independent retailers covered in the ‘retail sale of food, beverages and tobacco in specialised stores’ also recorded a reduction in the number of deaths, whilst the number of births remained flat at (0.37 per cent). This links strongly to the debate by Wrigley and Dolega. (2011), as the smaller more specialist retailers have been said to have struggled in the face of the difficult economic climate and increased competition from large supermarkets.
Figure 5.5 The percentage change in births and deaths from 2008 to 2010 by retail 2007 SIC in GB
Source: ONS (2012e)
The number of business closures and openings ultimately has a knock-on effect for the amount of people employed across the country. Therefore, Figure 5.6 displays the percentage change in employees between 2008 and 2010 for GB by the groupings which make up the retail 2007 SIC.
The data come from the Business Register and Employment Survey (BRES) which provides annual employment and employee estimates for the UK. For a more detailed account of this dataset, the reader is directed to Chapter 4. Once again, the data also include the percentage change in total employees for GB and for the retail market as a whole for context. It is also worth noting that the BRES data allow for further breakdown of the ‘retail sale in non-specialised stores’ group to include ‘retail sale in non-non-specialised stores with food, beverages or tobacco predominating’. Figure 5.6 highlights the large-scale decline in the number of employees which occurred between 2008 and 2010 across the majority of retail groups. This is not surprising given unemployment reached 2.5 million in the UK in 2010 (ONS, 2010b).
However, between 2008 and 2010, the number of people employed in ‘retail sale of automotive fuels in specialised stores’ and ‘retail sale in non-specialised stores with food, beverages or tobacco predominating’ actually increased by 15.13 per cent and 1.13 respectively. This highlights the strength and robustness of supermarket retailers during recession. Conversely, the
-60 -40 -20 0 20 40 60 80
Retail sale in non-specialised stores Retail sale of automotive fuel in specialised stores Retail sale of cultural and recreation goods in specialised stores Retail sale of food, beverages and tobacco in specialised stores Retail sale of information and communication equipment in
specialised stores
Retail sale of other goods in specialised stores Retail sale of other household equipment in specialised stores Retail sale via stalls and markets Retail trade not in stores, stalls or markets Total Retail Total
(% change)
Deaths Births
number of employees registered in ‘retail sale of food, beverages and tobacco in specialised stores’ reduced by -17.37 per cent. This is a considerable reduction when taking into account that the average decline in retailing as a whole was only -4.37 per cent. This would suggest that whilst the number of independent grocery businesses did not decline during this period (Figure 5.6), the number of employees were reduced substantially, arguably to make efficiency gains and to save the business in some cases.
Figure 5.6. The percentage change in employees from 2008 - 2010 by retail 2007 SIC in GB Source: BRES (2012e)